22 Mar 2024
Investors buoyed by Fed rate cut calls
Markets
- Local and global equity markets rose this week off the back of confirmation from the Fed they expect to cut rates three times this year, with investors happy some relief is on the way.
- In local stock news, iron ore miners saw some share price weakness as iron ore prices briefly dropped below US$100 a tonne for the first time in more than seven months. However, the iron ore price then rebounded strongly, spurred by upbeat Chinese economic data.
- Boral shares rose after their board said it was recommending shareholders reject a takeover offer from Seven Group, its majority shareholder.
- Superloop issued Aussie Broadband with a notice to sell Superloop stock to take their stake to below 12% given they had not received approval from the Singaporean regulatory when they bought 19.9% of the company, before launching a bid. Aussie Broadband is taking court action to stop the order. The interesting part is Origin Energy recently dumped Aussie Broadband for Superloop as their white-label provider.
- South32 shares fell after the company announced Tropical Cyclone Megan had damaged critical infrastructure at its open-pit manganese mine in the Northern Territory.
Economics
- The RBA left rates on hold at 4.35% at its March meeting. Little changed in their statement, but there was a very slight softening of the tone set versus the February statement regarding potential rate rises.
- Australian employment grew by a very strong 116,500 in February, which resulted in the unemployment rate dropping to 3.7% from 4.1%. Seasonal factors possibly still at play.
- The US central bank left rates on hold at 5.25-5.50% at their March meeting. The bank expects three rate cuts this year but interestingly revised higher its forecasts for growth and inflation.
- US industrial production rose by 0.1% in February, coming in slightly ahead of expectations whilst a key consumer sentiment reading fell in March against expectations of an improvement.
- A key US housing market activity indicator moved into positive territory, the highest level since July, and above expectations. Another data point showed housing starts jumped 10.7% in February, the most since May, whilst sales of existing homes rose 9.5%.
- An index of US leading economic indicators rose very slightly last month, the first increase since February 2022.
- Eurozone inflation came in as expected in February with consumer prices rising by 2.6% last month, down from 2.8% in January.
- Germany’s economic sentiment index rose strongly in March, off very low levels, and well above expectations.
- The Bank of England held interest rates steady with no members voting for rate hikes for the first time in a while, setting a more dovish tone.
- British consumer prices rose by 3.4% in annual terms in February after a 4% increase in January, the weakest rate of inflation since September 2021 whilst also coming in just below expectations.
- The Swiss National Bank cut its main interest by 0.25% to 1.50%, a surprise move which made it the first major central bank to dial back tighter monetary policy.
- The Bank of Japan finally moved off negative rates, the first time since 2007, increasing their cash rate to 0% from minus 0.1%. The move sent ripples through their bond and currency markets. Plenty of speculation it might be a one and done move.
- Chinese activity data was stronger than expected for industrial production and fixed asset investment while retail sales were in line with expectations. Industrial output rose 7% in January/February from the same period a year earlier.
- New Zealand December quarter economic growth came in at minus 0.1%, confirming a recession.
Politics
- Australia will begin enforcing tougher visa rules for foreign students as migration hit another record high, partly driven by higher foreign students. Language requirements for student and graduate visas will be increased.
- The UK Prime Minister ruled out a general election on May 2, signalling that a public vote would take place later this year.
- The Chinese government is accelerating its campaign to reduce reliance on Western imports and boost its home-grown semi-conductor industry. The move comes as much of the Western world continues to reduce their reliance on Chinese imports either by choice (new production lines) or by force (tariffs).
- Vladimir Putin secured another six years as Russia’s president, sweeping to a record victory with support well over 80%. Putin will travel to China in May for talks with President Xi.
- The US government moved to cut pollution from the nation’s cars and light trucks, imposing tailpipe emission limits so stringent they will compel automakers to rapidly boost sales of battery-electrical and plug-in hybrid models. The move comes after many US automakers scaled back EV production on mounting costs and losses, and waning demand.
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